| Money Making Strategies for Bear Markets |
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| Written by Shaun Rosenberg |
| Monday, 22 February 2010 14:40 |
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There are a lot of experts out there who are claiming that the market will fall back down and create another great depression. In reality no one knows were the market will be for sure, but if it does go down there are still plenty of ways to make money.
There are a lot of experts out there who are claiming that the market will fall back down and create another great depression. In reality no one knows were the market will be for sure, but if it does go down there are still plenty of ways to make money. In fact money can come faster in a bears market then in a bulls market because when stocks go down they tend to go down pretty fast, faster movements means faster profits. So, just how can you make money when your stock goes down? Simple there are 3 big methods that allow you to profit from a falling stock. 1. Short Stocks Shorting is the process of borrowing a stock from your broker and selling it on the open market. The idea is to sell it before the stock is going to o down. This way when the stock does go down you can buy it back at that lower price and return it to your broker. 2. Buying Puts A put option gives the buyer the right to sell a stock at a given price on or before a given date. For example if you buy the $80 put on stock XYZ you would have the ability to sell it at $80. Now as the stock goes lower and lower your $80 put becomes worth more and more. 3. Bear Call Spread The last strategy involves selling call options. When you sell a call option you give another investor to right to buy the stock from you at a given price. As long as the stock stays below the strike price of the call it eventually expires worthless and you walk away with the money. Of course if it goes up there is no limit to how high it can go, so the risk is unlimited unless you buy a higher call option. For instance if you sell the $50 call for $5 and buy the $55 call for $3 you would profit from the difference, $2. You would also limit your potential loss to $5 because even if the stock goes to infinity you can always buy it at $55. DISCLAIMER: This article is provided as information only and is not to be taken as financial advice. Learning what caused the great depression and how to make money in that situation can help you to prepare in case we see another crash like the 1929 Crash of Stock Market |